LONDON
(Reuters) — Starbucks Corp <SBUX.O> will move its
European headquarters to London from the Netherlands
this year and pay more tax in the UK as a result, the
company said on Wednesday.

The shift by the world's largest coffee chain comes
after its low tax contributions in Britain provoked
widespread criticism, including Prime Minister David
Cameron telling a meeting in Davos that companies that
avoided paying tax needed to "wake up and smell the
coffee".

Starbucks was called to testify before a parliamentary
hearing about its tax affairs after Reuters reported in
2012 that the company had told the UK tax authority its
British arm was a loss-making business while informing
investors that the subsidiary was profitable.

The company revealed at the hearing
that it had agreed a deal with Dutch tax authorities allowing it to
pay "a very low tax rate" there. This agreement meant the group was
able to reduce its tax liability by having its European subsidiaries
pay large royalties to the Dutch unit for using the Starbucks brand.

That system — slammed by UK lawmakers in a report in 2012 -will now
be abandoned and the European businesses will pay fees to a British
subsidiary, the group's Europe, Middle East and Africa boss said.

"This means we will pay more tax in the UK," Kris Engskov said in a
telephone interview.

Engskov said the criticism the company faced had not, as some
business leaders claimed, made Britain a less attractive place to
invest.

"The UK is a great place to do business," he said.

Heather Self, partner at law firm Pinsent Masons, said the move to
London followed a change in UK tax rules aimed at encouraging
international companies to locate their headquarters in Britain,
whereby UK-registered companies are no longer taxed on income earned
outside the country.

A Starbucks spokeswoman said the rule change had no impact on the
company's decision.

Starbucks also said it would open 100 new stores in the UK, creating
1,000 new jobs, after the relocation this year.

Senior executives will transfer to Starbucks' head office in
Chiswick, west London, though manufacturing jobs will remain in the
Netherlands.

Engskov insisted that Starbucks retained the support of customers in
spite of politicians' calls for boycotts and a preference among many
coffee afficionados for trendy, independent stores.

"We are as relevant as ever," he said.

(Additional reporting by Sampad Patnaik in Bangalore and Jack Stubbs
in London; editing by Tom Pfeiffer and David Goodman)